The Impact of Intellectual Capital on Firm Performance: A Study of Firms in Saudi Arabia

This study investigates the changes that occur between intellectual capital (IC) and firm performance (FP) and the relationship between them. The research involved the collection of data from different sources and analysing the same using ordinary least squares (OLS) statistics. Data was collected from thirty companies from Saudi Arabia for the period between 2017 and 2021. The aims and objectives of this research are to investigate the changes that occur between IC and FP and the relationship between them, to explore using a step-by-step process, whether a dynamic as well as a unidirectional relationship exists between IC and FP, and to consider the relationship between IC and FP by analysing OLS statistics collected from thirty companies in Saudi Arabia between 2017 and 2021.
The analysis showed that IC efficiency is significant albeit positively with return on assets (ROA) and return on equity (ROE). These are variables that endorses resource–based theory. When the data obtained was subjected to further investigation, it reveals the relationship between human capital, structural capital, and physical capital displaying their significance and further confirm the resource dependency theory. The results from this study will be very useful to companies and firms as they are going to give an insight on the importance of IC for FP. Policy setters for government, government or organisations and institutions can also use the results to make policies which put in consideration of IC for FP. The policies can be used to develop a framework for IC disclosure. Finally, this research has opened an avenue for scholars to do further studies on the same and bring out more information about the interrelationship between IC and FP.